22 percent. That's the combined levy Seoul plans to apply to crypto staking rewards and lending income from January 1, 2027. The rate is a 20 percent national income tax plus a 2 percent local surtax, and it will apply to annual virtual asset earnings that exceed a KRW 2.5 million basic deduction. The National Tax Service is finalising technical guidance and coordinating with major exchanges as the Finance Ministry prepares the rule for implementation.

Retail investors and exchanges will face new reporting and compliance demands, because Seoul plans to treat staking rewards and lending yields as taxable income under existing law.

The government says the new regime will tax annual virtual asset gains above a KRW 2.5 million exemption at 20 percent, with an added 2 percent local surtax for a total 22 percent rate. That structure was set out in research prepared for the National Tax Service and discussed in recent government sessions, where officials recommended treating staking and lending as forms of loan or rental or use income under the Income Tax Act.

How the tax will work

The tax design hinges on extending the legal concept of "use" of an asset to crypto staking and lending. Under the proposed mechanics, income is recognised when rewards are received, rather than at the time of a later sale. Airdrops and hard forks are excluded from taxation at receipt under the current plan, but they would be taxed when those assets are later sold.

The 22 percent figure breaks down into a 20 percent national income tax and a 2 percent local income surtax. The National Tax Service is drafting formal notices and technical procedures for collection, and officials have been meeting with major virtual asset operators to prepare exchange reporting infrastructure. The Finance Ministry has signalled that the NTS notice is scheduled for release in 2026 as part of preparatory steps, though the ministry warned that "soon" shouldn't be read as immediate publication.

Moon Kyung-ho, director of the income taxation division at the Ministry of Economy and Finance, told a National Assembly forum that the government intends to proceed with virtual asset taxation on schedule and that the National Tax Service is coordinating with major exchanges to prepare draft notices. Government figures cited by the Ministry of Economy and Finance put the number of exposed investors at roughly 13.26 million, a tally derived from cumulative membership at South Korea's largest exchange as of last December.

Mastheads

Industry pushback and wider compliance strains

The proposal has provoked resistance from traders and some lawmakers. A public petition opposing the 22 percent tax surpassed 50,000 signatures, triggering a mandatory referral to the National Assembly's Finance and Economic Planning Committee. Under parliamentary rules, a petition that reaches that threshold requires the standing committee to deliberate and to report its findings to the plenary within 90 days.

Opposition parties and industry groups have urged delays, arguing exchanges need more time to build reporting infrastructure and that a fair comparison with other investment vehicles is warranted. The government hasn't altered the start date, and it plans to treat gains from transfer or lending of virtual assets as "other income" from January 1, 2027.

At the same time, contemporaneous changes to anti-money laundering rules are adding to industry concerns. Proposed AML amendments would require exchanges to flag certain overseas linked transfers. Industry representatives warned those changes could sharply increase suspicious transaction reports, creating additional compliance burdens for exchanges while tax reporting systems are built.

Administratively, the National Tax Service is preparing technical guidance for how exchanges will report rewards and lending yields. That guidance will set out collection procedures and the forms or electronic feeds exchanges must supply. Officials have framed this as a coordination exercise with major operators so the reporting infrastructure exists before the tax takes effect.

The government has also clarified the timing for taxpayers. The tax is scheduled to begin on January 1, 2027, which means the first year of taxable activity under the new rules will be calendar year 2027. Initial income tax filings under the new regime are expected to be due in May 2028, when taxpayers report 2027 income under the usual filing calendar.

The research for the National Tax Service that informed the policy recommended the legal route of treating rewards as loan or rental income because it fits inside the Income Tax Act's existing categories. That approach avoids creating a novel tax category for virtual assets, but it will require exchanges and taxpayers to adapt existing reporting systems to capture the peculiar timing and valuation issues of staking rewards and lending yields.

For investors, the practical questions will be around record keeping and valuation. Because income is recognised when rewards are received, taxpayers will need clear records of the timing and fair market value of those receipts, and exchanges will need to deliver that information in a form suitable for tax filings. The NTS drafting work is meant to set those standards before exchange reporting goes live.

Politically, the debate is now heading into the parliamentary committee process. The referral triggered by the petition gives lawmakers a formal window to press for changes or delays, though the government has signalled its intention to stick to the timetable as it finalises technical guidance with the National Tax Service and exchanges.

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The National Assembly's Finance and Economic Planning Committee must review the petition referred matter and report to the plenary within 90 days of referral, even as the National Tax Service prepares its 2026 notice ahead of the January 1, 2027 start date. Originally reported by coinedition.com.

This article was created with AI assistance.